Betting Odds – What they Represent?

A conversation that all seasoned sports bettors may have had many times with their friends and peers wanting to place casual bets is: what are the present odds on A? What does that mean? How much will I win if I back A with this amount?
Understanding odds is easily the biggest challenge faced by newcomers to the sports betting industry. But what exactly are these betting odds and how do you figure out your returns based on them?
Once you understand the concept of betting odds, you can easily compare different bookmakers. However, you will end up missing the bigger picture if you treat betting odds as simply odds per se. In order to understand betting odds at a deeper level, you must learn how to calculate probability.
Sports betting is all about assessing probability or chance of a certain event. And bookmakers are in the business of doing exactly that!
Considering there are all sorts of odds formats – Money line, decimal, fractional etc. proves the point that odds are not an end in themselves, they are just means to place strategic bets. Bookmakers are actually dealers of risks measured based on probability.
We are all faced with different types of risks each day – Will I make it to the station on time? What are the chances of raining? Sometimes it’s surprising how an average person is so uninformed about the concept of probability!
The probability actually runs on a scale from 0, at which point there is no chance of the concerned event happening, to 1, where it is certain that the concerned event will happen. All potential events or outcomes fall somewhere in between 0 and 1, in terms of their chances.
Probability calculation can be easily learned with the help of a coin toss. It is certain that a coin will land either on tails or heads, combined together as a certain event, having a probability of 1.
As a sports bettor, all you should be really interested in knowing the probability of a certain outcome, which let’s assume to be tails. Following is a simple equation which can help you calculate the probability of getting tails:

Probability = Favourable outcomes / all possible outcomes

Now, to figure out the probability of tails, you need to divide 1 favourable outcome by 2 possible outcomes, hence:
1 / 2 = 0.5 = 50%
As people are more comfortable with percentages, the probability of 0.5 when multiplied by hundred gives you the percentage figure, or 50% chance.
Now that you’ve learned how to calculate probability, let’s learn how to turn it into odds. A large majority of bookmakers use decimal odds as their default odds format. You can figure out the decimal odds for the coin toss example using the following simple formula:

Hope you get the hang!
Now if you sum up the probability of all the outcomes, the end result should be 1. So, in the above example of coin toss:
0.5 + 0.5 = 1

So, where’s the catch?!
If you perform the above calculation using the odds provided by your bookmaker, you’re going to get a value higher than 100%. Why so?
Simply put, odds aren’t actually the true representation of the probability of an outcome. Bookmakers are known to charge a margin over and above the implied probability of 100%, as their service charge. Hence, if you add up the probabilities provided by your bookmaker, they are never going to sum up to 100%. That’s how bookmakers earn their money.
This is very important information that only value seeking sports bettors know about. Being able to calculate probability and odds can open up a whole new world of value-calculation for you! However, you would also like to know your expected payout. In the coin toss example discussed above, this can be easily arrived at using a simple formula: